HomeChoice limits ties with Post Office after strike dents profits
Retailer HomeChoice is reducing its reliance on the SA Post Office for delivering products by two-thirds after undelivered orders hit its annual profits.
The multichannel retailer sells homeware products such as bedding and pots online, through 4,000 direct marketing agents, a call centre, stores and at eight shipping containers.
In its 2019 annual financial results, released on Thursday, HomeChoice said despite a 4.9% increase in retail turnover to R2bn, its profits did not increase.
Its headline earnings per share were down 14.1% to 436c and its annual dividend was down 14.4% to 166c.
The 2018 Post Office strike “meant that we had higher than normal opening stock holdings at the beginning of the year. The decision to aggressively promote and clear the surplus stock resulted in a reduction in the gross profit margin,” HomeChoice said.
The company has already reduced the post office’s deliveries from 23% in 2018 to 16% in 2019. It plans to use it for 5% of orders in 2020.
This is another blow for the Post Office, which is facing an uncertain future as fewer and fewer people use its service, instead relying on private courier services. It is facing a leadership crisis after CEO Lindiwe Kwele was suspended in December.
The Post Office, which has not been profitable for 13 years, recorded a R1.1bn loss in the 2018/2019 financial year.
HomeChoice’s strategy to move away from using the Post Office to deliver goods will result in the company using up to 50 containers from which customers can collect their orders, said CEO Shirley Maltz.
The retailer opened six bright pink containers in Gauteng, Eastern Cape and Western Cape townships in the past year, bringing the total to eight.
The containers, which are solar powered and Wi-Fi connected to enable customers to make orders on tablets at the store, are privately owned. HomeChoice pays the individual owners commission for each sale and collection.
HomeChoice has also set up its own delivery services through a partnership with 10 companies that employ 60 drivers, said Maltz. “Having our own delivery network was strategic.”
The company needed drivers who were familiar with township address systems, said Maltz.
As the coronavirus affects global supply chains and leads to an economic slowdown, she said it had enough stock to fulfil orders until May.
About 75% of its predominantly female customers have extra income streams, said Maltz making them somewhat more resilient in the tough economic times.
HomeChoice financial services business, FinChoice, increased its loans by 27% to reach a value of R2.3bn.
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